Projects reports to Boards and to owners

 

Project costs of 2018,
presented to owners during the 2018 Annual Meeting

Project reports to the HOA owners and the board are useful.  It is important to track expenditures but in my experience, boards at BLMH didn't do a good job of tracking the actual long term project costs.  There are a variety of reasons to do so, including the building of better budgets and the preparation of owners for positions on the board.

Of course, this information must also be responsibly communicated.

I prepared a variety of spreadsheets and charts as a member of the board 2010-2018.  This is one in a continuing series on the benefits of doing this.  Owners get better insights, and the board can make better decisions, if they choose to do so.  See Notes 1, 2, 3 and 4 as an example.

The chart above was presented to owners during the September 2018 annual meeting.  That was my final meeting as a board member. (Note 1).

When I was a board member, I created spreadsheets as condition reports and surveys to present to the board so the board could properly perform its fiduciary duties and maintain the property. I also created spreadsheets to track project expenditures as the board voted to perform that maintenance.  To be clear about this, Management did provide this information in a different form and presentation to the board each month via the monthly "Information Packet".  However, my goal was improved communications and better board decisions.  The board's decision to replace management effective January 1 means I can't say anything about the future.

In 2018 I made a sheet and presented it during the annual meeting, so owners could see where the board was spending the reserves.  I did similar sheets for a variety of projects completed or undertaken during previous years.  I was on the board for eight years and millions of dollars were spent on roofs, drainage, streets, water mains & fire hydrants, driveways, garage floors, streams, common decks, unit patios & property bridges & decks, tree removal and replacements, and so on.  

I do have a very good idea of how much was spent and where.   How is that?  Because I paid attention and kept notes and made spreadsheets.  The chart below is an indicator.  I held a variety of positions over an eight year period, including Maintenance, Architecture directors, and president. I made it a point that that these financial insights were all thoroughly discussed.  Owners, who are the shareholders of this not-for-profit corporation, were informed during meetings and via the newsletters. 

There is no requirement that owners attend association meetings, although I also made it a point as a board member to promote that they do, and I rewarded those who did with informative meetings. 

As an example, I included the chart above as part of presentations to the board and to the owners during a regularly scheduled meeting and I telegraphed it via the newsletter.  I would have included more and at times I even expended the pages in the newsletter to provide additional information.  

Not all board members agreed, and some remain on the board to this very day. Since 2019 that has been reflected in the newsletter and in the termination of the BLMH.org website by the board in 2021.

Even the "Welcome Packet" was allowed to wither by non-supportive board members. It hasn't been updated, nor is it available online.

(C) N. Retzke 2021

Creating Budget Surpluses through better Processes

 

Budget status August 31, 2018, prior to annual budget meeting

This post will compare two budgets. The 2018 annual budget included a zero percent fee increase.  This was not an accident, nor was it a financial gamble.  This was the last budget I participated in at BLMH and it was one of a series that created a surplus.  In other words, the board ran the association in such a manner that all work per the Operations & Maintenance (O&M) budget was completed, the Replacement Fund (reserves) were fully funded, but not all owner fees were spent to accomplish this.

2018 was the culmination of 8 years of hard work and planning. 

Creating annual budgets was a challenge during my board tenure, from September 2010 until September 2018.  This period included the "Great Recession" and fallout from the 2008 banking crises. We experienced owner fee delinquencies that exceeded $80,000 in one year. Yet, we stabilized fees and avoided the 3 to 7% annual fee increases of earlier boards, and we simultaneously eliminated an extensive maintenance and repair backlog.

During this period Homeowners Associations (HOAs) experienced severe financial difficulties. Some owners found that they could not afford to pay the mortgages and HOA fees. Dealing with this was a challenge for boards.  To do so responsibly as a board member required that owners be held accountable for their agreements. In other words, all owners were equally and fairly required to pay their fees.  The budgets were constructed with that understanding, even though some owners did not, and some foreclosed.  As a consequence, annual "bad debt", which is uncollectable fees reached a peak in 2013 and 2014 of about $30,000.

Commencing in 2011 significant changes were made to better monitor and control the fallout of delinquencies and foreclosures, and in so doing, shield other owners from the consequences of their neighbor's misfortune or financial mistakes.  Earlier boards had never considered such problems and so there were limited financial controls in place.  I saw the handwriting on the wall in December 2006 and so I began preparing.  Few would listen at the time.  By fall of 2008 owners elected a new board with no prior HOA board experience, and very limited business experience.  Some said "We have enough money" but I attributed that to denial.  It wasn't until September 2010 that things had become so ugly that desperation set in among owners and some board members.  So, I got a seat on the board but it was solely because of an earlier treasurer who created a vacancy for me.  "You can lead them to water, but you can't make them drink" is an old expression.  

From the period 2011-2018 the board was diligent in collecting fees.  I've written about that in other posts.  Even so, there were significant delinquencies and "bad debt" which is owner fees and related legal collection expenses which were owed the association and never collected.

Delinquencies and "Bad Debt" 2009-2018

As a responsible fiduciary I worked to construct budgets which would balance, keep fees to a minimum, maintain the association and a balance. It isn't possible to create a "perfect" budget in which expenses match the forecast made in the prior year. As a consequence, budgets were designed to create a small surplus each year.  Of course, that might or might not occur.  The budget could balance, but it was paramount not to overcharge owners, or create a shortfall which would be an issue for the next year's board to deal with. So, I led boards in creating budgets which could include a small surplus.

That small, anticipated surplus was to be a cushion.  If such a surplus did occur, it was a contribution to the Replacement Fund (reserves).  This was important because there were failing roofs at end of anticipated life as well as failing streets and failing water mains that had to be dealt with.

Patio Condition Survey

 

Patio Survey - My Spreadsheet September 2012
Survey by our Manager and I.
Presented to the board in September 2012

After I joined the board in September 2010, I initiated a lot of onsite surveys.  These were a necessity because the board was unaware of the condition of much of the infrastructure.  The earlier board had left in September 2010 but did not turn over condition reports to the new board; I suspected there were none.  Management provided whatever they had and that became the beginning of regular, annual surveys from 2011-2018.

I did the survey, for some of them management joined me, and for others another board member joined me.  

The need for these surveys became apparent when several owners approached the board in September 2010 and reported issues with garage floors. The board considered a repair, but I asked if we had a list of the condition of the 84 garage floors on the property.  We didn't.  I asked the board to delay a replacement until a proper survey could be made.  The board agreed.  

The garage floor condition survey was conducted in early 2011 and was reported to owners in the May-June 2011 Newsletter.  That survey revealed eleven garage floors in "poor" condition. The article is available by clicking here:

May-June 2011 Newsletter - Garage Floor Survey

To avoid any confrontations, I would never do garage or patio surveys unless accompanied.  

Patio Survey

The garage floor survey was the first of many, regularly scheduled annual surveys. 

The patio survey in the image above was submitted to the board in September, 2012.  One board member, who had been on boards for a couple of decades contested my findings.  It was her position that earlier boards believed that they had repaired all of the patios.  The facts and owner statements disproved that.

I conducted a formal survey because I observed some patio issues during my normal walk-arounds on the association property.

All of these surveys had the intention of best directing maintenance resources and avoiding breakdowns.  All resources were paid for by owner fees, and breakdowns would be at a minimum an inconvenience for owners, and at worst, require higher repair costs.  Higher costs result in higher fees.

(c) N. Retzke 2021